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Does a franchisor have to provide accountability for its advertising/marketing fund?
A great majority of franchisors charge a separate marketing fee. This fee can only be used by the franchisor to market and promote the franchisor’s business and the businesses of its franchisees. The reason that a separate marketing fee is charged is to ‘ring fence’ this payment and thereby give reassurance to franchisees that the franchisor will not be making use of the payments for any purpose other than marketing or promotion. As a result, it has become customary for franchisors to pay all of the marketing fees into a separate fund/account and to provide franchisees with details on what the franchisor has spent the payments. Sometimes franchisors agree to have the marketing account separately audited or certified by their auditors. This would enable franchisees to check up on the franchisor to ensure that monies have, indeed, been spent for marketing/promotional purposes. Whether franchisees are able to check up on the franchisor will depend on the terms of the franchise agreement, but prospective franchisees need to be cautious about entering into a franchise agreement with a franchisor where this guarantee concerning the use of the marketing fund is not given by the franchisor.
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